G7 Price Cap on Russian Oil

The G7 price cap is a rule set by the Group of Seven (G7) countries, the European Union and Australia. It says their companies can help ship, insure or finance Russian oil going to other countries only if that oil is sold at or below a fixed maximum price. The idea is to let Russian oil keep reaching world markets, so that global prices do not jump, while cutting the money Russia earns from it.

Why does it exist?

After Russia invaded Ukraine in 2022, Western countries wanted to reduce Russia's oil income, which helps pay for the war. But simply banning all Russian oil worldwide would remove millions of barrels a day from the market. That could push oil prices very high, hurting poor and oil-importing countries such as India. The price cap tries to do both things at once: keep the oil flowing, but at a lower price.

Think of a shopkeeper who is told he may keep selling, but only below a certain price, so he earns less.

Where did it come from?

The G7 (the US, the UK, Canada, France, Germany, Italy and Japan) agreed on the idea in 2022, together with the EU and Australia. This group is called the Price Cap Coalition. The cap began on 5 December 2022 for crude oil at $60 per barrel, the same day the EU stopped buying Russian crude by sea.

On 5 February 2023, two caps for refined products were added: $100 per barrel for products that sell above crude (like diesel) and $45 per barrel for products that sell below crude (like fuel oil).

How does it work, step by step?

• Most of the world's tanker insurance, shipping finance and many tankers are controlled by companies in coalition countries.
• These companies may give their services for a cargo of Russian oil only if it is bought at or below the cap.
• To prove this, buyers and traders give attestations (signed statements) that the price was within the cap. Service providers keep these records.
• If a cargo is sold above the cap, coalition companies must refuse to carry, insure or finance it. Breaking the rule can lead to penalties in their home country.
• The cap does not stop a country like India from buying Russian oil. It only controls whether Western services can be used.

How has the cap changed?

• 3 September 2025: The EU and the UK lowered the crude cap from $60 to $47.60, and Canada and Switzerland followed. The US did not join and kept $60.
• The EU also moved to a dynamic cap: it is set at 15% below the average market price of Russian Urals crude over the previous period and reviewed every six months.
• 1 February 2026: Under this formula, the EU and UK cap fell to $44.10 per barrel (as of February 2026).

India's position

India is not a member of the Price Cap Coalition and has not accepted it. India says it buys oil from wherever it gets the best price, to protect its 1.4 billion people from high fuel costs. Indian refiners buy Russian crude at market prices, often at a discount, and use whichever ships and insurance are available. When they use Western services, those cargoes must follow the cap. India has also argued that the discounted purchases helped calm global prices.

Commonly confused concepts

• Price cap vs embargo: An embargo is a full ban on buying a product (like the EU's ban on Russian seaborne crude). A price cap allows sales to others but limits the price at which Western services can be used.
• Price cap vs Urals price: Urals is the name of Russia's main export crude blend and its market price. The cap is a policy limit, which may be above or below that market price.
• G7 vs G20: The G7 is a group of seven rich democracies. The G20 is a bigger group of 19 countries plus the EU and the African Union, which includes India and Russia. The price cap is a G7-led measure, not a G20 one.
• Price cap vs OPEC+ production cuts: OPEC+ (oil producers including Saudi Arabia and Russia) controls how much oil is produced. The price cap tries to control how much Russia earns per barrel.

Issues, criticism and the way forward

• Shadow fleet escape: Russia moved much of its trade onto ships outside the Western system, so the cap stopped applying to those cargoes.
• Weak checks: Attestations are easy to fake, and investigations found many cargoes sold above the cap.
• Split among members: The US stayed at $60 while the EU and UK lowered their cap, reducing the united front.
• Impact on countries like India: Supporters say the cap kept oil flowing and gave buyers discounts. Critics in importing countries say it brings uncertainty, legal risk and higher shipping costs.
• The way forward: Experts suggest better tracking of tankers, tighter rules on attestations, and closer coordination among coalition countries, while keeping global oil supply stable.

Concepts to Know

• Barrel: The standard unit for oil, equal to about 159 litres.
• Crude oil vs refined products: Crude is raw oil from the ground. Refined products (petrol, diesel, jet fuel) are made from crude in a refinery.
• Attestation: A written promise or proof that a rule was followed, here that the oil was bought at or below the cap.
• Discount: When Russian crude sells for less than similar crude from other countries, because fewer buyers want it.